Values Based Financial Planning To Generational Legacies for Your Children and Grandchildren

Values based planning offers an alternative to traditional planning. Here is a strategy where we consider utilizing the greatest single asset any family has, and that is the family itself, and the life value.

Consider this…go back in time prior to the industrial revolution. What did our country look like ? It was farm land, and it was passed from generation to generation. We didn’t see the kids and grandkids grow up to become attorneys and doctors and engineers, for the most part. They stayed and home and the farm passed from generation to generation.

When did this stop ? Exactly when corporate America got into the family business. No longer are the children and grandchildren involved. Now they are off to college to become something else altogether. Now that may well be a good thing, but does it create great values in the family. The greatest wealth was what the family brought to the table, but that is now in the hands of corporate America.

In today’s world, if you want to pass great wealth on from generation to generation, you can no longer just let it pass in the family will. If you are fortunate enough to have a large sum of assets, you have to plan so that government doesn’t erode them with income taxes, and more importantly for the affluent, death taxes.

Legacy planning is all about bringing the family back home. Since the greatest value in the family is the value of life, why not bring a creative method of planning to tap into that tremendous value. Let’s look at this:

If we want to insure a key element of the family for life insurance, there are a couple of ways we can look to maximize this.

1) Income based planning – this considers how much money you earn while you are working and creates a multiple of sometimes 20 X your income. That can be a substantial amount.

2) Asset based planning – this method assesses how much your assets will be worth at the edge of your life expectancy.

If we use a combination of this, we can come to a large number. Now most planners think that the head of household should be the key family member, but if you are going to create a legacy for generations, you have to think outside the box a little bit.

Before we delve into that, let’s take a look at how we can generate the most capital to create our legacy. This is where a skilled financial planner comes in. The planner will take a look at your assets, liabilities, income, debt, current taxes, and future needs to plot a course to cut out all of the fat, and put a substantial number in front of you to work with. In many cases, that number can be as little as 5% of your annual income, and as much as 25%. If you have an income of $100,000 to work with, that means that the planner will be able to allocate $5,000 to $25,000 to your legacy plan.

How can we apply that money to maximize its’ effect ? Well, let’s go back to the family and look at that. Let’s analyze the family makeup. If we have the Grandparents in their 70’s, and the parents in their 40’s or 50’s, and the children in their teens and 20”s, where do we find the highest level of assets ?

With the Grandparents, of course ! Along with a high level of assets, and maybe income, they also have the highest level of insurability. The question that arises is, why would we consider insuring the Grandparents ?

The average at retirement is still hovering around 65. What happens when you reach age 65 ? The grandparents are in their 80’s or 90’s, effectively nearing the end of their illustrious lives. If life insurance can be purchased with strict guarantees (and it can), then why not use that to guarantee the legacy that they leave behind ?

When you can guarantee a legacy for generations (life insurance), at possibly 10 to 20cents on the dollar (premium cost), the answer becomes apparent. Let’s also take a look at how we can leverage this further.

Let’s say that you are the parent, and you have your family income that we can restructure and save $15,000 per year. Let’s also say that you have 2 brothers, and one sister. If they have a similar income, and we can do similar things for them, then you now have $60,000 per year to build your family legacy. How much legacy can that create ? The answer lies between you and your financial planner, but I can assure you, it is a substantial figure.

Let’s look at another option, too. Let’s consider that your family has a high level of insurability, but does not want to pay the cost of premiums on the Grandparents. Whether you have life insurance now, or want to do a leveraged purchase, using some sort of premium financing, the insurance policies today have tremendous value as an asset.

This is called Life Settlements, and it is becoming an ever increasing market. If you own or purchase a policy on someone over 70 years old, there is a huge secondary market to sell those policies to an institution that sees value in life insurance. And I can guarantee you this ! If an institution can profit from buying and selling life insurance policies from seniors, then the investment value for the family is tremendous.

Whether you want to buy and hold a life insurance product, or sell your existing policy to a secondary market institution, the value in the family is the single greatest asset you hold. Maximize what you have today, so tomorrow will see generational wealth and safety.

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